A possible recall for Tesla may seem like a bad thing, but its quick fix for the offending Model S shows why this savvy car manufacturer is way ahead of its competitors.

After two incidents involving Tesla’s 2013 Model S striking metal objects on highways, causing punctured batteries and fires, the U.S. National Highway Traffic Safety Administration (NHTSA) opened a preliminary evaluation of the car’s safety.

This is a serious concern for Tesla – over the past five decades 390 million cars, trucks, buses, recreational vehicles, motorcycles, and mopeds, have been recalled by the NHTSA.

The impacts of a recall or the threat of a recall are immense. Analysts estimate the financial blowback from Toyota’s 2010 gas pedal global recall could total more than $5 billion. This after a 10-month investigation by NHTSA safety officials absolved the electronics in Toyota vehicles saying driver error was to blame for most of the incidents.

In response to the NHTSA evaluation, Tesla has done something pretty interesting. It’s released an over-the air update that will enable vehicles with the Smart Air Suspension package to automatically adjust the suspension to higher levels at highway speed. Another software update expected this month will give the driver direct control of the air suspension ride height transitions.

In layman’s terms, over-the-air updates mean Tesla owners don’t have to trade in their old cars or take them to the shop to get upgrades installed. Instead, with the use of connected software, drivers get an automatic update.

In this way Tesla is addressing the threat of regulation and delivering product enhancements instantly and at minimal cost.

The use of software to get ahead of the game is not new to the auto industry. As manufacturers are hit with more and more regulation, software can play a key role. Software and sensor driven Engine Control Units (ECU), for example, enable manufacturers to develop engines that comply with Corporate Average Fuel Economy (CAFE) and Environmental Protection Agency (EPA) emissions standards.

Tesla, however, is leading the way with over-the-air updates – made possible with AT&T network chips that also allow for free Internet browsing, navigation, and streaming music.

The “air suspension” update may not satisfy NHTSA regulators and a physical product recall could still happen. But what started as a regulatory threat may in the end validate Tesla’s strategy. Investors seem to think so, Tesla shares were trading up $5.87, or 4.7 percent, to $127.43 in the first hour of trading after the news broke.

In an ironic twist of fate, Google, and many other tech companies, are beginning to realize that they need things to capitalize on the enormous Internet of Things (IoT) opportunity.

We live in a smart, connected world. The number of things connected to the Internet now exceeds the total number of humans on the planet, and we’re accelerating to as many as 50 billion by the year 2020 according to Cisco. A recent McKinsey Global Institute report, Disruptive Technologies, finds that the IoT has the potential to create an economic impact of $2.7 trillion to $6.2 trillion annually by 2025.

The bad news for tech companies is that the majority of those 50 billion things are not going to be computers and phones. They are going to be homes, cars and bodies. Google may dominate in the traditional computing platforms, but this new smart, connected world is the wild, wild west.

The connected home. Not surprisingly, there is a lot of buzz around Google this week after it agreed to pay $3.2 billion in cash for Nest Labs, which makes a smart, connected thermostat and smoke detector. However, Google has been focused on establishing its platform in the home since 2011 when it announced the Android@Home framework for home automation. The vision is that all of our home appliances, gadgets and infrastructure will communicate with one another through a new computing platform. Owning that platform, like owning the OS on your computer is key, and Nest may be Google’s Trojan horse.

The connected car. At the 2014 International Consumer Electronics Show (CES) in Las Vegas the IoT was once again a central theme, and auto OEMs lead the charge. Audi and Chevrolet announced plans for embedding 4G LTE connectivity in their cars, and with connectivity comes new apps and services all requiring an OS. Apple had already announced iOS in-car capabilities with the release of iOS 7, and not to be outdone, Google announced the Open Automotive Alliance (OAA) at CES. This global alliance of auto industry leaders including GM, Honda, and Audi, is committed to bringing the Android platform to cars starting in 2014.

The connected body. As reported by Financial Review, Google was awarded nearly 2000 patents in the United States last year, almost double the number of all previous years combined. This highlights a race to stake out promising new technology markets, as fields such as wearable computing become the next frontiers for growth. Much of the wearable computing focus for Google has been associated with Project Glass, Google’s effort to develop augmented reality glasses. While Google offered Google Glass to a handful of developers and technology enthusiasts for $1,500 this year, there is buzz a public release is likely early next year.

“Google will help us fully realize our vision of the conscious home and allow us to change the world faster than we ever could if we continued to go it alone,” Nest CEO Tony Fadell wrote in a blog post. The world is changing faster than ever, and Google is betting on homes, cars and bodies to be the things that enable competitive advantage in a smart, connected world.